The Buyt Desk
The Indian government has introduced new labour laws for the betterment of employee’s life. Laws have been modified to help both employer and employee.
New Labor Laws introduced in India have made significant changes with respect to employee’s salary, annual leaves, leave encashment and final settlement. Even employees’ working hours, in-hand salary they get and many more aspects pertaining to employment and work culture will change once the new labour codes are put into practice. Under the four labour codes, the Ministry of Labor and Employment has confirmed rules and made way for reforms. Implementation of these rules based on the four broad codes on wages, social security and occupational safety, industrial relations, health and working conditions (OSH) will happen soon.
The Centre has come up with an amended labour law to improve employees’ well-being at work. The new labour codes aim to revamp the rules that defined the age-old relationship between employers and their employees. The central government has amended the laws to bring change in the salary system, annual leaves, leave encashment and final settlement laws when an employee quits the employer.
What are the changes under the new labour law?
Employee salary under new labour law – As per new labour laws, the most affected aspect is the salary component. There will be significant changes to take-home salary and PF contributions. This new amendment aims at uniformity. This is considered a major impact as it alters the statutory pay-outs such as bonuses, gratuity, and contributions towards provident funds and employees’ state insurance. The new law says that the basic salary should be a minimum of 50 % of the employee’s gross salary. So this will also alter the PF contributions of the employer and the employee. So with the increase in PF contribution, take-home salary will decrease for employees working in the private sector. This new rule aims to increase the retirement corpus including PF and gratuity funds to beat inflation.
Leave encashment under new labour laws – After structuring salary and statutory pay-outs, the ministry aims to restructure the leave policy. The new rule encourages employees to annually encash unused leaves. This facility was allowed only upon separation earlier but is now available at the end of the calendar year. This will be very helpful and encouraging for employees. Now excess carry-forward leaves can be encashed instead of wasting it by forfeiting. Employees will be encouraged to work without taking leaves so that it can be encashed at the end of the calendar year.
Final settlement under new labour law – As per new law, the final settlement should be made within two working days of an employee’s exit. Employees can get separated from the employer either by resignation, retrenchment or termination, in all cases, the pending payment of salary to an employee should be made in 2 days. Currently many take even up to 2 months to compute the final settlement salary and do the payment. This new rule aims to bring down this time drastically.
Working hours under new labour law – Under the new rule, the total working hours per week is not changed and is still 48 hours per week. The change is that employers and employees can opt for 12 hours day shift and work only for 4 days a week and get 3 days of mandatory offs. Employees can opt to work 12 hours and it is not a must and should rule.
Eligibility for leave under new labour law – Earlier, the labour law said that employees should work for a minimum of 240 working days in a year before asking for a leave. Under the new law, this time period is reduced to 180 working days.
